Utah venture deals hit $188 million

Venture capital investments to Utah companies rose to $188 million in 2004, up 76 percent from $107 million in 2003, marking the first time investments surpassed pre-Internet bubble levels.

According to the MoneyTree Survey released Monday, there were 24 venture deals in Utah last year, up from 22 deals in 2003.

The state's average deal size in 2004 reached $7.8 million, up from $4.8 million in 2003. The U.S. average deal in 2004 amounted to $7.3 million.

In the fourth quarter, VC deals in Utah totaled $49 million, up from $6 million during the same quarter in 2003, but down from a revised $64 million in the third quarter of 2004.

"As far as Utah is concerned it was a very good year overall," said Steven Stauffer, senior audit manager of PricewaterhouseCoopers in Salt Lake City. "I think a lot of it has to do with valuations improving for later-stage companies. I think that the confidence of the investors is returning. They're more likely to invest larger sums of money into companies."

Utah investments in 2004 exceeded venture capital funding of $117 million in 1998, the year prior to the tech bubble.

"If this can keep up we are going to become the venture capital hub in the western United States sans the West Coast," said Brad Bertoch, chief executive officer of the Wayne Brown Institute, a nonprofit that helps businesses find venture funding. "It shows that we have really bucked the trend of that tech downturn."

Linux Networx Inc., a supercomputer company based in Bluffdale, secured $40.1 million in the fourth quarter. Investors included Connecti- cut-based Oak Investment Partners and Tudor Ventures.

Other fourth-quarter investments included $7.6 million to Provo-based Cogito Inc. and $1.6 million to Draper-based DriveSafety, a company focused on driver training technologies.

"We didn't have to go out and seek new funding," said Bill Woahn, chief executive of DriveSafety, whose latest Utah-based investors included vSpring Capital, Wasatch Venture Fund and the EsNet Group. "We just simply had this second round coming in from our existing investors, so it was not that complicated. We could be profitable as soon as the end of this year."

Nationally, VC investments totaled $20.9 billion in 2004, up from $18.7 billion in 2003.

"Software companies are still doing very well as far as being able to get money," Stauffer said. "The two hot industries right now are biotech and software. It seems like for Utah software is probably the more dominant of the two."

The MoneyTree Survey is made in cooperation with PricewaterhouseCoopers, Venture Economics and the National Venture Capital Association.

The survey captures equity investments but excludes debt, bridge loans, recapitalizations and initial public offerings.

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